Locum Tenens Tax Obligations: 1099 Income, Travel Deductions, and Tax Home Rules

A locum tenens physician is almost always classified as an independent contractor, paid on a 1099 basis, working temporary assignments at facilities that don’t withhold a dollar of tax from any payment. That arrangement puts the entire burden, calculating self-employment tax, making quarterly estimated payments, figuring out which travel costs are actually deductible, and tracking multi-state licensing and filing obligations, on the physician, with no employer safety net catching any of it automatically. The single most consequential and most misunderstood piece of this is the tax home rule: whether a physician has a genuine, ongoing tax home determines whether their travel, lodging, and meals on assignment are deductible business travel or non-deductible personal commuting costs, and getting that wrong is the most common and most expensive mistake locum tenens physicians make on their returns.

Why is locum tenens classified as independent contractor?

Locum tenens physicians are engaged by staffing agencies or directly by facilities to fill temporary gaps, and the working relationship, set schedule blocks, no long-term employment commitment, the physician typically supplying their own malpractice tail coverage or working under the facility’s policy without being a payroll employee, generally satisfies the common-law independent contractor factors under Rev. Rul. 87-41 rather than an employer-employee relationship.

• Payments are reported to the physician on Form 1099-NEC rather than a W-2, with no federal income tax, Social Security, or Medicare tax withheld at all. The physician receives the gross contracted amount and is entirely responsible for calculating and remitting their own tax.
• Net income (gross 1099 payments minus deductible business expenses) is reported on Schedule C and is subject to self-employment tax under IRC 1401, calculated on Schedule SE, at the full 15.3% rate up to the Social Security wage base ($176,100 for 2025, indexed annually) and 2.9% above it, plus the 0.9% Additional Medicare Tax above $200,000 (single) or $250,000 (married filing jointly), thresholds that are not indexed for inflation.
• Half of the self-employment tax is deductible above the line under IRC 164(f), which partially, but only partially, offsets the fact that a 1099 physician bears both the employer and employee side of this tax, unlike a W-2 physician whose employer bears half of the equivalent payroll tax cost separately.
• A locum tenens physician can establish a solo 401(k) or SEP-IRA against this self-employment income, and can deduct ordinary business expenses (malpractice tail coverage if self-funded, licensing costs, continuing education, and the travel expenses discussed below) against the gross 1099 income before the self-employment tax calculation applies, meaning every legitimate deduction reduces both income tax and self-employment tax simultaneously.

Why does “tax home” matter for locum tenens?

The tax home concept, drawn from IRC 162(a) and developed extensively through IRS guidance and case law, determines whether travel expenses count as deductible business travel (away from a home base) or non-deductible personal commuting and living costs.

• A taxpayer’s tax home is generally the entire city or general area of their regular or principal place of business, not necessarily the location of their personal residence. For a physician with one regular, ongoing practice location, the tax home is straightforward: it’s wherever that practice is.
• A locum tenens physician working a string of temporary assignments at different facilities in different cities, with no single regular place of business, presents a harder case. If the physician has a regular place of business somewhere (even if they also travel extensively for locum work on the side, or if a majority of their working time and income is anchored to one location) that location is the tax home, and travel to other, temporary locations away from it is deductible.
• If a physician has no regular place of business at all, working purely as an itinerant from assignment to assignment with no anchor location, the IRS and courts generally treat that physician as having a tax home wherever they happen to be working at any given time, meaning they’re never “away from home” for travel deduction purposes anywhere, and none of their travel, lodging, or meal costs on any assignment are deductible, precisely because there’s no fixed home base to be away from.
• Physicians frequently misunderstand this as being about where they maintain a personal residence; it isn’t. A physician who owns a house in Denver but works locum assignments full-time in a rotating set of other cities, with no regular practice location anywhere, including in Denver, cannot automatically claim Denver as a tax home just because that’s where the house and the mailing address are. The tax home test looks at the location of work, not the location of the personal residence, and a mismatch between the two is exactly the fact pattern that generates IRS scrutiny.

How does the one-year rule affect a long assignment?

Even a physician with a solid tax home elsewhere can lose the travel deduction on a specific assignment if that particular assignment runs too long, under a rule sometimes called the one-year rule.

• Under IRC 162(a) and related IRS guidance (Rev. Rul. 93-86 and Publication 463), a work assignment away from the tax home is “temporary” if it’s realistically expected to last (and does in fact last) one year or less. An assignment expected to last more than one year, or that actually exceeds one year regardless of the original expectation, is treated as indefinite rather than temporary.
• Once an assignment is indefinite, the location of that assignment becomes the physician’s new tax home for tax purposes, and travel, lodging, and meal costs at that location stop being deductible from that point forward, since the physician is no longer “away from home,” they’re now considered to be working at home.
• The rule applies based on realistic expectation at the outset, not just actual duration; if a physician reasonably expects an assignment to last eight months and it later gets extended to fourteen, the assignment is treated as temporary up until the point the expectation changed to indefinite (generally when the physician knew or should have known the assignment would exceed a year), and only becomes indefinite (losing the deduction) from that revised-expectation point forward, not retroactively for the entire assignment.
• Locum tenens physicians who take a long-running renewal or extension at the same facility need to track this explicitly; a string of “temporary” 90-day contract renewals at the same hospital that collectively run past twelve months is exactly the fact pattern the IRS looks for, and courts have consistently looked at the substance of the ongoing relationship rather than the technical contract renewal structure when the facts show the physician always intended, or reasonably should have expected, to stay past a year.
• A physician approaching the one-year mark on any single-location assignment should plan for the loss of the travel deduction going forward and, if flexibility exists, consider whether ending the assignment before the one-year mark and starting a new one elsewhere (a genuine change, not a sham break) better preserves deductible status, though this decision should be driven by the actual work situation, not manufactured purely for tax effect.

What about per diem rates, and do they simplify anything?

The IRS publishes per diem rates (through the federal per diem tables, commonly the GSA rates for lodging and the separate meals and incidental expenses, or M&IE, rates) that self-employed taxpayers can use as a simplified substitute for tracking actual expenses in certain categories.

• A self-employed locum tenens physician can generally use the federal M&IE per diem rate to substantiate meal expenses without keeping every individual receipt, though the deduction is still limited to 50% of the per diem meal amount, same as the actual-expense method, under IRC 274(n), the same substantiation framework covered in our physician tax deductions guide.
• Self-employed taxpayers generally cannot use the per diem method for lodging the way certain employees can under an accountable plan; a self-employed physician typically needs to deduct actual, substantiated lodging costs rather than a lodging per diem, though this is an area where the rules differ from the employee reimbursement context and should be confirmed against current IRS guidance for the specific situation.
• Per diem or actual, the underlying tax-home and one-year-rule analysis controls whether any of this is deductible at all in the first place; per diem rates simplify the substantiation of an already-deductible expense, they don’t create deductibility for travel that fails the tax-home or one-year test.

How does multi-state licensing affect tax filing?

A locum tenens physician who holds medical licenses in and works assignments across several states almost always has a multi-state income tax filing obligation that doesn’t simplify just because the physician has one home state.

• Income is generally taxable by the state where the services are physically performed, regardless of the physician’s state of residence or domicile, meaning a physician working a six-week assignment in a state with an income tax owes tax to that state on the income earned there, filed as a nonresident return, in addition to whatever the home state requires.
• The home state generally taxes the physician’s full income regardless of source (assuming the home state has an income tax) but typically allows a credit for taxes paid to other states on income also taxed there, preventing full double taxation, though the credit mechanics and any gap (a home state credit limited to what the home state would have charged on that income, which can be less than what the work-state actually charged) vary by state and need to be calculated each year, not assumed to net to zero automatically.
• A physician working assignments in a state with no income tax at all (Texas, Florida, and several others) owes no state income tax to that work-state regardless of income earned there, which is one real financial advantage of prioritizing assignments in no-income-tax states, all else equal, though it shouldn’t be the sole driver of which assignments a physician accepts, any more than entity structure should be chosen on tax savings alone.
• Multi-state licensing itself (maintaining active licenses in several states to remain eligible for locum work there) generates its own recurring deductible cost (license fees, continuing education required to maintain each license), separate from and in addition to the multi-state income tax filing obligation the licenses enable.

What should a locum tenens physician set up beforehand?

Set up quarterly estimated tax payments from the first assignment, calculated against both income tax and self-employment tax, rather than waiting to see what the first year’s return shows; the safe-harbor rules under IRC 6654 (generally 90% of the current year’s tax or 100% to 110% of the prior year’s, depending on income level) determine what avoids a penalty, and a physician transitioning from W-2 to 1099 work mid-year needs to run this calculation carefully rather than relying on habits from a withholding-based paycheck. Confirm the tax home explicitly, in writing if the situation is at all ambiguous, before assuming travel costs are deductible, since this is the single most contested item on a locum tenens return in an exam. And track the one-year clock on every ongoing assignment, planning ahead for the point an extension converts a temporary assignment into an indefinite one.

Related guides:

• Physician compensation models: RVU-based, salary plus bonus, and K-1 income, for how 1099 locum income compares to W-2 and partnership compensation
• Tax deductions for physicians: equipment, CME, and malpractice insurance, for the broader deduction rules that apply alongside the travel-specific rules here
• Retirement plans for physicians: defined benefit, 401(k), and cash balance plans, for retirement plan options available against 1099 self-employment income
• Medical practice entity structure: PC, PLLC, and S-corp election, for physicians considering incorporating their locum tenens work

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.